India-US trade deal: Opening India’s dairy sector to America could cause huge losses; 'Rs 1.03 lakh crore annually…’

India-US trade deal: Even as India and the US look to finalise an interim trade deal, dairy and agriculture continue to be sticky issues. India has hardened its stance on opening its dairy and agriculture sector to the US, a move experts say is necessary as opening the dairy sector may cause huge losses. India and the US are close to finalising a trade deal with US President Trump indicating that an agreement is likely soon.

A recent State Bank of India (SBI) analysis reveals that Indian dairy farmers could face annual losses of Rs 1.03 lakh crore if the sector opens to US imports.



India's dairy industry is integral to its rural economy, generating approximately 2.5-3 per cent of the national Gross Value Added (GVA), equivalent to Rs 7.5-9 lakh crore.

The sector provides employment to about 8 crore individuals directly, creating one employment opportunity for every Rs 1 lakh contribution to GVA.

Also Read | India-US trade deal: Will Donald Trump go for less than 20% tariff rate for India? Top 10 developments to track

Why India Shouldn’t Open Up Dairy Sector - Explained

The SBI analysis highlights concerns about the impact on small-scale dairy farmers' income, noting the substantial subsidies received by the American dairy industry.

According to the SBI report quoted by ANI, "If the dairy sector is opened up, price of milk in India is likely to drop by at least 15 per cent which could cause potential annual loss of Rs 1.03 lakh crore to dairy farmers."

SBI's report underscores the substantial risks to Indian farmers' income from US dairy competition, suggesting that India's milk imports could rise by approximately 25 million tonnes per year.

According to the analysis, a 15 per cent reduction in milk prices would adversely affect farmers' earnings and diminish the industry's economic significance.

The calculated GVA reduction would reach Rs 0.51 lakh crore, considering expenses for inputs including feed, fuel, transportation and uncompensated family workforce.

Also Read | ‘Unnecessary trade barriers…’: US hits out at India’s dairy certificate requirements at WTO; raises issue amidst trade deal talks

The analysis additionally indicated benefits from enhanced India-US trade relationships in alternative sectors.

Currently, India's exports of premium agricultural products, including organic food and spices to the US, are below $1 billion, with scope for expansion beyond $3 billion, considering US market demand.

Fresh produce exports, including mangoes, litchis, bananas, and okra, could experience significant growth upon the removal of sanitary and phytosanitary (SPS) restrictions.

The lifting of non-tariff barriers presents an opportunity to enhance exports of Ayush products and generic medicines, potentially increasing revenue by $1-2 billion.

The anticipated advantages include simplified visa procedures, expanded outsourcing prospects, American investments in cold storage facilities and precision farming technologies, alongside reduced costs for agricultural necessities such as feed, equipment, and veterinary supplies.

The analysis indicated that whilst liberalising the dairy sector could foster enhanced economic and strategic partnerships with the US, it is crucial to consider the potential negative effects on the livelihoods of millions of Indian farmers.

Also read: Trump administration may cut tariff to below 20%; putting India in favourable position against other countries

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